Date: Sun, 15 Feb 2009 14:25:35 -0800 From: Norm Matloff To: Norm Matloff Subject: some recent events To: H-1B/L-1/offshoring e-newsletter Here are some updates on some of my recent postings: 1. Prof. Bill Kerr, one of the authors of the Harvard Business School study on H-1B patenting, has replied to my critique of his study with an eight-page letter in PDF format. I suggested that I post the letter here, with my comments, and he agreed. I'll do so when I get a chance, which will probably be in a week or so. 2. As some of you know, last week a New Jersey employer was indicted on charges of H-1B fraud. However, I almost never report on such incidents, as I regard them as irrelevant to the big H-1B picture. The central problems of H-1B and employment-based (EB) green cards involve fully legal abuse via loopholes in the law, as opposed to violations of the law, and the large household-name firms are just as culpable as the "bodyshops." Indeed, the industry lobbyists love it when the feds crack down on violators of H-1B law, as it gives them a chance to distract Congress and the press from the real issues (the loopholes), and to distract attention away from the big-name firms. See http://heather.cs.ucdavis.edu/Archive/PascrellJohnsonDebate.txt for an example of this. 3. The Sanders/Grassley amendment to the economic stimulus bill survived conference committee. Recall that the amendment extends to recipients of TARP bailout money the H-1B hiring restrictions that normally apply only to H-1B dependent employers. As I explained in previous posts, especially http://heather.cs.ucdavis.edu/Archive/AILAvSandersGrassley.txt the restrictions are rather mild. And they too have loopholes. Nevertheless, they will have some practical impact, and much more importantly, have major symbolic impact, as they are tacit admission by Congress that the H-1B visa program is fundamentally a Bad Thing. In the past, Congress' message--and I mean the word "message" literally, in the form of the politicians' public statements and letters to constituents--is that H-1B is basically a Good Thing, remedying tech labor shortages and enabling the import of "the best and the brightest" from around the world. Members of Congress continued to make such statements in spite of the facts that: * Congress' own study, commissioned as part of the 1998 legislation that nearly doubled the yearly H-1B cap, found that it could not confirm the industry's claim of a shortage studies. None of the other studies then and since, including that of the Dept. of Commerce (but excluding industry-sponsored studies), found a shortage either. * Two congressionally-commissioned reports, as well as various academic studies, found that use of H-1Bs as cheap labor is commonplace. The GAO report also made the point that loopholes make it fully legal to pay H-1Bs less than comparable Americans. * It has been shown quantitatively in several different ways that only a small percentage of the H-1Bs are in the "best and brightest" league. * The YouTube video, made by a prominent law firm to show its prominent clients (i.e. mainstream firms rather than bodyshops) how to circumvent the EB green card law requiring employers to recruit Americans before sponsoring a foreign worker for a green card, was widely circulated by members of Congress. Yet, Congress has continued to ignore the mountain of information against H-1B and EB green cards, and continued to discuss those programs as Good Things. The one small concession they've made has been to demonize the bodyshops. Those firms present an easy target, especially since they tend to be owned by Indian-Americans and Indian parent companies (Congress is not above appealing to xenophobia, as Rep. Zoe Lofgren unwittingly demonstrated in a House hearing), and as I said, such demonization serves the purpose of distracting attention from the big mainstream U.S. firms that make the big campaign contributions to both major parties. Recall that when Congress enacted another H-1B increase in 2000, Sen. Robert Bennett remarked, "Once it's clear (the visa bill) is going to get through, everybody signs up so nobody can be in the position of being accused of being against high tech. There were, in fact, a whole lot of folks against it, but because they are tapping the high-tech community for campaign contributions, they don't want to admit that in public," and the Republican Congressional Campaign Committee Chair, Rep. Tom Davis, said, "This is not a popular bill with the public. It's popular with the CEOs...This is a very important issue for the high-tech executives who give the money." So, in light of Congress' past refusal to acknowledge the fundamental statutory bankrupcy of H-1B and their steadfast protection of their patrons in the tech industry and the American Immigration Lawyers Association, their passage of the Sanders/Grassley amendment is quite remarkable. Again, this is not because the tangible impact will be huge, but because it implicitly acknowledges that H-1B is a Bad Thing used for Bad Purposes by mainstream firms (in this case, the big financial institutions being bailed out by TARP). It places H-1B on par with exhorbitant salaries made by TARP-recipient CEOs and cheap foreign steel, both also under discussion now. Again, the CEO salary issue has never bothered me, but my point is that by approving the Grassley/Sanders amendment, Congress is finally recognizing H-1B for what it is, an awful program abused by almost everyone. Enclosed below is a BusinessWeek article on the amendment. I have comments on a couple of passages: # The amendment falls short of preventing large banks from using H-1Bs # brought into the U.S. by outsourcing firms like India-based Infosys # (INFY), Wipro (WIT), and Tata (TCS.NS), which are among the top # recipients of petitions for the H-1B visa program. In other words, a # bank could still legally force a laid-off American employee to train a # replacement worker who is on an H-1B visa on an outsourcing firm's # payroll. These are some of the large bodyshops. As I mentioned last week, I am currently preparing a major study on the bodyshops. This is a bit ironic, as I believe too much of the H-1B discussion centers on them, when in fact the mainstream firms are just as culpable, but for that very reason I feel the need to go into the issue in depth. For now, though, I wish to point out that most bodyshops are officially deemed to be H-1B dependent, and one of the restrictions on such employers is that they are not allowed to displace U.S. workers even at client firms, i.e. firms to which the bodyshops rent out their "bodies." As usual, there are a number of loopholes here, but the situation is not quite as stark as the reporter writes above. Also, the article notes: # Rising unemployment is leading to more scrutiny of the H-1B visa # program and its effects... True, but I wish to point out again that unemployment rates do not tell the real story in the tech field, for two reasons. First, those rates don't count the people who have been driven out of the field by H-1Bs; as Gene Nelson famously put it, the former software engineer now working as a security guard counts in BLS data as an employed security guard, not as an unemployed software engineer." Second, a very substantial fraction of techies work as independent contractors; H-1Bs cause their business to go down, yet they (the contractors) don't count as unemployed either. The article follows below. Norm http://www.businessweek.com/blogs/money_politics/archives/2009/02/stimulus_tighte.html Stimulus: Tighter H-1B Controls on Bailed Out Banks Posted by: Jane Sasseen on February 13 By Moira Herbst In the final version of the stimulus bill, Senate and House negotiators agreed to stricter limits on banks and other firms that take taxpayer bailouts that use the H-1B visa program. The proposal by Senators Bernie Sanders (I-Vt.) and Charles Grassley (R-Iowa) was added to the economic recovery package in the Senate on Feb. 6. A conference committee retained the provision in the version of the bill that is expected to win final congressional approval in the coming days. The U.S. Chamber of Commerce and the American Immigration Lawyers Association had lobbied against inclusion of the provision. The amendment that passed isn't as tough as the one Senator Grassley originally proposed on Feb. 5, which would have prohibited firms from hiring H-1Bs altogether. The modified amendment in the final bill instead makes TARP recipients jump through extra hoops before they can hire those foreign workers. "The very least we can do is to make sure that banks receiving a taxpayer bailout are not allowed to import cheaper labor from overseas while they are throwing American workers out on the street," said Sanders in a statement. Here's a link to all of the companies that have received assistance through the TARP program and which are required to follow the new H-1B hiring guidelines. The amendment falls short of preventing large banks from using H-1Bs brought into the U.S. by outsourcing firms like India-based Infosys (INFY), Wipro (WIT), and Tata (TCS.NS), which are among the top recipients of petitions for the H-1B visa program. In other words, a bank could still legally force a laid-off American employee to train a replacement worker who is on an H-1B visa on an outsourcing firm's payroll. Rising unemployment is leading to more scrutiny of the H-1B visa program and its effects. On Feb. 12, federal authorities announced 11 arrests and the indictment of one firm as part of a coordinated, nationwide crackdown on H-1B fraud. Such efforts are likely to hamper efforts by companies like Microsoft (MSFT) and Oracle (ORCL) to expand the H-1B visa program without considerable reform.